Value Investing Strategies of Warren Buffett and Benjamin Graham

I just read an article that Warren Buffett wrote recently in The New York Times. In the article, Warren Buffett mentioned that he is currently putting his own cash into equities. What is his reason for doing so?

In the midst of the financial crisis, Warren Buffett has moved in to buy over a company – at a bargain price.

Constellation Energy, a company which is the nation’s largest competitive supplier of electricity to large commercial and industrial customers and the nation’s largest wholesale power seller, was bought over by MidAmerican Energy Holdings Company, a subsidairy of Berkshire Hathaway.

The purchase was paid for in cash for abuot $4.7 billion, or $26.50 per share. For the record, Constellation’s stock closed at $58.37 last Friday and finished 2007 at $102.53.

BUFFETT: I mean, if you’ve got a great deal in this country, you don’t have to go to Beijing, you know, or the Middle East to find somebody with money to fund it. It’s like when oil prospectors would come up here from Texas and they’d say, `We got a wonderful deal for you in Texas,’ I always thought, there are all these oil men in Texas, you know, why didn’t they call on them?

QUICK: So you think the sovereign wealth funds are getting the raw end of the deal when they buy into some of the financials?

BUFFETT: I think that they are buying what is being sold to them, and in securities you should not buy what’s being sold to you. You should buy what comes from your own analysis and looks the cheapest. The idea that somebody is going to come and call on you and say, you know, `Buy $2 billion worth–this is the best thing to buy in the world,’ it isn’t the best thing to buy in the world.

The best thing to buy in the world is something that you’ve dug out and that people aren’t talking about and that, you know, you find yourself. Securities that are being sold to you have a special push in it. Usually, there’s extra commissions in them or all kinds of things. So I don’t–I don’t want to get ideas from other people, basically. I want to get ideas from a bunch of facts that I uncover someplace.

Moral of this story: Always do your own homework when it comes to investing!

A few days ago, 90 MBA students were at IMD Business School in Lausanne for an interview session by MBA Programme Director Benoît Leleux with his two guests Warren Buffett and Israeli family business ISCAR Chairman Eitan Wertheimer.

I have also compiled and rephrased some of the questions posed to Warren Buffett and his replies below.

How do you manage all your companies?

I don’t. The key to management is about getting things done by other people. I can’t run those business as I don’t know a thing about them. I have managers I don’t see for three or four years. On the other hand, there’s one I talk to every day. We have no company meetings.

Warren Buffett said that the Canadian dollar is likely to outperfom the U.S. dollar in coming years. He himself had bought a couple of billion dollars worth of Canadian currency some time ago. However, he regreted that he didn’t buy more and kept them longer. He also continues to hold the Brazilian real.

It appears the federal government is likely to follow policies that will make the dollar even weaker. Warren Buffett continues his bearish stance on the U.S. dollar but does not feel the need to hedge on other currencies.

As a result of the weakening U.S dollar, Warren Buffett said he was happy to invest in overseas companies as currencies in those countries are not likely to decrease relative to the U.S. dollar.